01785cam a22002657 4500001000700000003000500007005001700012008004100029100002400070245011300094260006600207490004200273500001900315520065000334530006100984538007201045538003601117690006601153690008101219700002501300710004201325830007701367856003801444856003701482w18646NBER20161209234840.0161209s2012 mau||||fs|||| 000 0 eng d1 aBurnside, A. Craig.10aOn the Asset Market View of Exchange Ratesh[electronic resource] /cA. Craig Burnside, Jeremy J. Graveline. aCambridge, Mass.bNational Bureau of Economic Researchc2012.1 aNBER working paper seriesvno. w18646 aDecember 2012.3 aWe offer a critique of the popular notion that the log-change of the real exchange rate equals the log-difference between the IMRSs of economically distinct agents in two economies. Contrary to existing claims, we show that this interpretation does not hold true in reduced-form SDF models that only rely on the absence of arbitrage in asset markets. In structural models, we show that this economic interpretation requires much stronger assumptions that emphasize the importance of goods markets rather than asset markets. We demonstrate the significance of our results for a broad range of topics in the international asset pricing literature. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aF31 - Foreign Exchange2Journal of Economic Literature class. 7aG15 - International Financial Markets2Journal of Economic Literature class.1 aGraveline, Jeremy J.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w18646.4 uhttp://www.nber.org/papers/w1864641uhttp://dx.doi.org/10.3386/w18646